A New Bill Would End Taxes on Social Security Forever -- Does It Have a Chance?

President Trump campaigned on several tax changes, including the elimination of taxes on tips, overtime, and Social Security benefits. His tax and spending legislation, which is called the "big, beautiful bill," certainly delivered on the first two. However, instead of eliminating taxes on Social Security benefits, the bill included a new tax deduction for senior citizens with income below certain thresholds. This will provide relief to some Social Security recipients but is far from a complete elimination of taxes on benefits. Image source: Getty Images. There are some good reasons why this was left out. Most significant is that Social Security is currently running a deficit and expected to run out of reserves altogether within a decade. So it might not be the best move to eliminate one of its major funding sources without making other changes to counteract the effects. One Senator recently introduced a bill that would eliminate taxes on Social Security benefits entirely but would also make one other change to help pay for it. Below are the details, as well as a look at whether the new bill has a realistic chance of being signed into law. You earn it, you keep it The bill, which is called the "You Earn It, You Keep It Act," was introduced by Sen. Ruben Gallego (D-Ariz.), and Rep. Angie Craig (D-Minn.) introduced a companion bill in the House of Representatives. The major change it would make is the permanent elimination of federal taxes on Social Security benefits. Clearly, this is popular on both sides of the political spectrum. As mentioned, it was a campaign promise of President Trump, and the new bill to eliminate it was introduced by a Democratic senator. Under current law, Social Security beneficiaries with combined income (adjusted gross income (AGI) plus tax-exempt interest and half of Social Security benefits) of $25,000 or more may have to pay taxes on their benefits. Here's the catch Where Democrats and Republicans differ on this issue is how to pay for it. The "You Earn It, You Keep It Act" would create an additional Social Security payroll tax bracket that would require the 6.2% tax to be paid by both employers and employees on income in excess of $250,000. So the Social Security payroll tax would look like this: 6.2% on earned income up to $176,100 in 2025 (this is the current law). Both employers and employees pay this tax, and self-employed individuals pay both taxes, a total rate of 12.4%. Income greater than $176,100 and less than $250,000 wouldn't be subject to Social Security payroll tax. Income greater than $250,000 would have the same 6.2% payroll tax rate as the lower bracket, again paid by both employers and employees, with self-employed individuals paying 12.4%. A big change This change would do a lot of good for the Social Security program. Not only would it pay for the elimination of taxes on Social Security benefits, but it would also extend Social Security's solvency from 2034 to 2058 -- giving an additional 24 years before the reserves would run out. This isn't likely to be a politically popular change, especially on the right. Republican lawmakers generally aren't in favor of raising Social Security taxes in any form and prefer to tackle the problem with benefit reductions (such as raising the full retirement age). However, a survey funded by the AARP found that 85% of Americans -- including majorities of both Republicans and Democrats -- would be in favor of raising taxes on some or all Americans if it meant that Social Security would be able to keep paying benefits in the future. While it remains to be seen whether the bill will gain any significant traction, it might have more of a chance than it seems.